Henry Chesbrough About the Future of Open Innovation

Henry Chesbrough is known as the father of Open innovation. InnovationManagement.se asked him about the concept and how companies can benefit from working with Open innovation.

How do you think that the open innovation concept will change the innovation landscape?

– The open innovation concept will cause the innovation landscape to become flatter and more distributed. Knowledge monopolies will become passé and even very small companies will enjoy access to partnerships and collaborations with companies all over the world.

And why do you think that?

– At the most basic level, I think this because useful knowledge itself is increasingly distributed very widely. No one has a monopoly on useful ideas. Industries like cell phones or medical devices are arising first in places like Finland, Taiwan, or Israel.

How can companies benefit from use the Open innovation concept in the current time of financial crises?

– They can benefit by turning fixed costs (from internal development) into variable costs (through risk sharing partnerships). They can benefit by licensing out unused internal ideas and technologies. They can foster growth in their ecosystems, which create complementary products and services. They can keep in close touch with departing employees, and perhaps hire some of them back when growth returns. And growth will return sooner or later.

You are, among other things, known as the father of Open innovation. Can you tell us a little about the conception and birth of it? How and when did it all start?

– It started with my own experience in the hard disk drive industry. My own company, Quantum, was a very small company that competed with IBM – a very large and very capable company. Yet we were consistently winning against them: growing market share, hiring away key employees. How was this possible?

– Another step in the process was my research at Xerox, where I studied the famous PARC laboratories. How was it that Xerox created and supported such wonderful technology, but could not find effective ways to use much of it? How did the spinouts from PARC achieve success outside of the company, when they had fewer resources and no corporate backing?

– The final step was when I sat down to write a book about my research on industrial innovation. Up in the mountains with my wife, she pressed me to distill my thoughts as succinctly as possible. That’s when the term “open innovation” popped into my mind.

Which departments/branches within companies do you think could benefit the most from using the Open innovation concept?

– I think that the R&D branch and the product development branch can benefit the most. Because open innovation can accelerate time to market, reduce upfront fixed development costs, and obtain greater value from internal projects that would otherwise be unused.

And which departments/branches might find it more difficult?

– The support functions will find this very difficult, because it requires a whole new way of working and thinking. HR, finance, and legal departments, for example, have developed processes that fit with the earlier Closed model of innovation. These processes must be changed in order for open innovation to take root within the company.

Related to size of the organization, is Open innovation as useful to SMEs (small & medium enterprises) as to bigger organizations?

– Yes, in fact most SMEs are already fairly open because they have little alternative. The good news from open innovation is that you no longer have to be big to be good. SMEs will, however, have to think hard about which ecosystems to play in, and how to align their business models with those of the ecosystem leaders.

Related to geography and cultural differences – which markets are quicker to adopt to and benefit from the concept – and which ones are slower?

– Markets experiencing higher growth will adopt more quickly, as the costs of change are lower. Mature businesses will struggle, and likely not adopt open innovation until they reach a crisis point. This is because change is hard and expensive. It is easier to maintain the status quo.

About Henry Chesbrough

Henry Chesbrough is Adjunct Professor and Executive Director of the Center for Open Innovation at the Haas School of Business at UC Berkeley. Previously he was Assistant Professor and Class of 1961 Fellow at Harvard Business School. He has a Ph.D. from Berkeley, an MBA from Stanford, and a BA from Yale, summa cum laude. He is the author of Open Business Models (Harvard Business School Press, 2006) and Open Innovation (Harvard Business School Press, 2003). He is a popular teacher, sought-after speaker, and noted scholar. Among other awards, he received Scientific American’s Top 50 Innovators, and is known as “the father of Open Innovation” (Wikipedia).